The Bank of England is concerned about the growing influence of cloud computing in finance. The bank of England has called for new rules to govern the use of services such as Amazon (AMZN) Web Services and Microsoft (MSFT) Azure in industries such as banking and insurance.
The central bank identified the rise of cloud computing as a significant source of concern in its bi-annual Financial Stability Report, which examines risks to the UK’s financial stability and how firms prepare for them. Additional policy measures to mitigate financial stability risks in this area are required, said members of the Financial Policy Committee.
Cloud service providers are becoming an increasingly important part of the financial system’s infrastructure, “Andrew Bailey, governor of the Bank of England, told journalists. There are numerous reasons for this, including the fact that it is a successful model. However, as they become more integrated, the risks to the system and systemic risks increase, and it becomes a much more critical area of focus.
According to Bailey, The Bank of England is concerned about the security of new cloud systems, shrouded in secrecy.
The Three Companies’ Cloud Services
As the market becomes more concentrated on a few suppliers, those suppliers can wield market power in terms of price and terms of service, Bailey stated. That is where they are concerned and must exercise caution because concentrated power on terms can manifest itself in the form of secrecy, opacity, and failing to provide customers.
Bailey and his colleagues did not name any companies specifically, but concerns are likely to center on Amazon, Microsoft, and Google (GOOGL). According to recent estimates, the three companies’ cloud services AWS, Azure, and Google Cloud, control nearly 60% of the global cloud computing market.
The Bank of England declined to provide specific figures on cloud computing usage in the UK financial sector. Still, Sam Woods, deputy governor and head of the Prudential Regulation Authority, stated that critical systems have increasingly moved to the cloud.
That is no longer something that happens on the outskirts of banks’ systems — a less critical HR system versus a core ledger. For example, as it was a few years ago, he stated. Things that are now moving are much more critical. That is not necessarily a bad thing, in their opinion. It may be a good thing. But all they have to do now is make sure that their statutory obligations meet.